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SACRAMENTO - California embarked Tuesday on a sweeping effort to curb suburban sprawl by rewarding communities that build homes and workplaces closer together to reduce pollution that contributes to global warming.
However, a multibillion-dollar proposal to curb air pollution near the state's ports was rejected by Gov. Arnold Schwarzenegger, who concluded that the related cargo fees would harm an already suffering economy.

SACRAMENTO -- California embarked Tuesday on a sweeping effort to curb suburban sprawl by rewarding communities that build homes and workplaces closer together to reduce pollution that contributes to global warming.

However, a multibillion-dollar proposal to curb air pollution near the state's ports was rejected by Gov. Arnold Schwarzenegger, who concluded that the related cargo fees would harm an already suffering economy.The state's water crisis also attracted his attention Tuesday as he approved $842 million to boost the water supply and bolster endangered levees.

The three environment-related measures were in the spotlight as Schwarzenegger finished work on this year's legislation before a midnight deadline. In 2008, Schwarzenegger has signed 771 bills and vetoed 415.

He won some praise for signing landmark legislation to control the state's global-warming emissions by discouraging sprawl with the nation's first law using government incentives to link transportation funding with climate policy. "What this will mean is more environmentally friendly communities, more sustainable developments, less time people spend in their cars, more alternative transportation options and neighborhoods we can safely and proudly pass on to future generations," Schwarzenegger said in a statement after signing SB 375.

The number of miles Californians drive has been growing at twice the rate of the state's population increase, as suburbs have spread farther into the countryside. Slashing the amount of driving is critical for California to meet its goal of cutting greenhouse gas emissions by 30% in 12 years.

"Land use is . . . the hardest part of the climate equation," said Thomas Adams, president of the California League of Conservation Voters. "This signature sends a crucial message from Arnold to sprawl: 'Suck it up.' "

Under the new law, projects built in denser communities will get priority in the distribution of $12 billion to nearly $20 billion a year in transportation funds -- a hefty incentive for communities to create more environmentally friendly development plans.

But the 17,000-word law involved a delicate compromise with powerful building interests. To woo their support, its sponsor, incoming state Senate leader Darrell Steinberg (D-Sacramento) exempted them in many cases from strict environmental reviews. That sweetener in the bill caused some environmentalists to oppose it.

The port fee legislation the governor vetoed was the top priority of some environmental groups. It would have imposed a fee on cargo containers to pay for programs to reduce air pollution and traffic congestion.

"Given the current economic downturn," Schwarzenegger said, "it is vitally important that the state does not worsen the situation by mandating added costs on business that do not provide any public benefit."

"The governor killing this year's most important piece of environmental legislation doesn't help anyone," said Martin Schlageter, a spokesman for the Coalition for Clean Air. "It's disgusting."

The measure, SB 974 by Sen. Alan Lowenthal (D-Long Beach), would have allowed the collection of $60 for each 40-foot container that moved through the ports of Los Angeles, Long Beach or Oakland, which handle more than 40% of the nation's goods.

The $400 million raised annually would have gone into reducing traffic congestion and putting cleaner-burning engines in trucks and trains.

Backers said 3,700 die each year because of health effects of air pollution caused by moving goods. "This is a sad day for California," Lowenthal said. "There is a dark cloud over our heads, and that dark cloud is cancer. The governor could have shrunken or eliminated that cloud but chose to side with out-of-state corporate executives instead."

More than 100 top businesses in California opposed the bill, including Anheuser-Busch Cos. and Coca-Cola, as did the California Chamber of Commerce and the California Grocers Assn. Alaska Gov. Sarah Palin, the GOP vice presidential candidate, also weighed in against it, worrying that it would drive up the price of goods in her state.

Mike Jacob, vice president of the Pacific Merchant Shipping Assn., said: "Now is a phenomenally bad time for the state to be imposing an additional fee on top of the fees we already pay."

The governor was more receptive to the water solution proposed by Senate President Pro Tem Don Perata (D-Oakland). Nearly $900 million will soon flow from state coffers to water projects all over California under a measure Schwarzenegger signed to distribute some of the water and flood control bonds passed by voters two years ago. In signing SB 1XX, Schwarzenegger said the $845-million appropriation will not solve long-term water supply problems.